Correct Answer:
C. were playing
This sentence describes an ongoing action in the past that was interrupted by another past action. The past continuous tense ("were playing") is used to describe an action that was in progress at a specific time in the past or when another action occurred. "When it started raining" indicates the interruption. "Play" (simple present) and "plays" (simple present for third person singular) are incorrect as the event happened in the past. "Played" (simple past) would suggest a completed action, not an ongoing one that was interrupted. The past continuous perfectly captures the simultaneous nature of the ongoing activity and the sudden interruption.